Mumbai: Beating Street estimates, Tata Motors Ltd, India’s largest auto maker by sales, posted a 100-fold jump in net profit due to a buoyant local market and a surge in sales at UK subsidiary Jaguar Land Rover (JLR).
Net profit rose to Rs2,222.99 crore for the quarter ended 30 September compared with Rs21.78 crore in the corresponding quarter a year ago.
A Bloomberg News poll of analysts had estimated second-quarter profit at Rs1,448 crore.
Total income rose by 33.99% to Rs28,801.54 crore against Rs21,495.17 crore for the quarter ended 30 September 2009.
On a stand-alone basis, Tata Motors posted a net profit of Rs.432.70 crore for the September quarter compared with Rs729.14 crore for the same quarter last year, down 40.65%.
If adjusted for one-time income from sale of investments in September 2009 quarter, Tata Motor’s local profits grew 20.6%
“Production at JLR continues to be impacted because of the constraints at the suppliers end,” said Ralf Speth, JLR chief executive officer.
Speth has been appointed as a non-executive director on the Tata Motors board.
Tata Motors chief financial officer C. Ramakrishnan cautioned exchange rates could have an impact on profitability in the coming quarters.
About half of JLR’s turnover is dollar linked and one-fifth is linked to the euro. The rupee has strengthened against both currencies this year.
Since January, the local currency has strengthened 4.9% against the dollar and 7.7% against the euro.
The company will focus more on the Chinese market, the world’s largest car market, and building an assembly plant in India, company executives said.
“There are concerns regarding commodity prices, we are taking several steps to ensure the impact is marginal,” said Prakash M. Telang, managing director, India operations, Tata Motors.
In an analyst conference call, Ramakrishnan said there was no “capacity constraint” “but supply constraints remain”.
Taking its cue from the broader recovery currently under way in key markets such as the US and Europe, JLR sales expanded 43% to Rs16,170 crore.
The introduction of new models such as the XJ, which commands a premium of at least 8-10% over its predecessor, caused margins at Tata Motors to widen by one percentage point to 16.5%.
Sustaining the momentum may be a challenge because of currency fluctuations, although newer models will help margins, some analysts said.
The company may find it difficult to repeat its first-half performance in the second half.
“The exchange rate, which was favourable all along, thereby helping margins, is now turning adverse,” said Vineet Hetamasaria, analyst at brokerage Pincmoney, an arm of Pioneer Invest Corp.
On Tuesday, the stock rose 2.55% to Rs1,270.55, having reached an intra-day high of Rs1,294.7. The earnings were reported after the markets closed. The benchmark Sensex was little changed.
Tata Motors’ India operations reported sales of Rs115,04 crore, 44.2% higher than a year ago driven by strong bus and truck sales.
Following an equity issuance of $750 million (Rs3,330 crore), which improved the company’s capital structure, Standard and Poor’s Ratings Services raised its long-term corporate credit rating on Tata Motors to BB- from B+. It also raised the issue rating on the firm’s senior unsecured notes to BB- from B+ on 27 October.
Bloomberg and Varun Sood contributed to this story.